A GP partnership choosing between renting its surgery from a third party and owning it (usually through a separate property partnership or LLP) is making a tax decision as much as a clinical one. Ownership unlocks notional rent, asset growth and capital allowances, but it brings SDLT on purchase, illiquidity and a capital gains tax bill on the way out. This guide walks the whole own-versus-rent tax picture for a GP surgery, from the SDLT on a freehold purchase, through the capital allowances on the integral features (and the fixtures election that is so often missed and lost), to capital gains tax and Business Asset Disposal Relief on an eventual disposal.
This is a specialist and practice-specific area, and the figures below for any individual surgery would depend on a valuation. The numbers used in the worked examples are clearly illustrative, chosen to show how the tax works rather than to suggest what any real surgery costs. Premises and partnership tax decisions should be taken with practice-specific advice.
The decision in one paragraph
Rent from a third party (a private landlord, a developer, or the NHS-owned estate) and there is no capital outlay and no asset risk, but equally no asset and no notional rent in your own pocket: the NHS reimburses the rent and you remain a tenant. Own the surgery (usually through a property partnership or LLP) and notional rent reimburses you, you build an asset and you can claim capital allowances, but you take on SDLT, a loan, illiquidity and a future CGT bill. The right answer is genuinely practice-specific, and depends on the partnership's appetite for capital and risk, the local market and the partners' plans.
The two ways to rent
The first route is a third-party commercial lease, from a private landlord or a developer. The practice is a tenant, and the NHS reimburses the rent through the leasehold reimbursement route under the Premises Costs Directions (the rent schemes are explained in our notional rent vs cost rent guide). There is no ownership and no asset growth, but there is flexibility, and the partners avoid the ownership exposure that drives the last man standing problem (though a lease carries its own version of that risk, covered in that guide).
The second route is the NHS Property Services or NHS-owned estate, where the practice occupies NHS-owned premises. The commercial terms differ, but the principle is the same as any tenancy: the practice occupies and is reimbursed, rather than owning. We keep this brief because the tax decision that follows is really about the alternative, ownership.
Owning the surgery: the property partnership or LLP
The common ownership structure is to hold the premises in a separate property partnership or LLP, outside the medical partnership, so that property ownership and the clinical partnership are not locked together. This is the single most important structural choice in owning a surgery, and it is the same structure that manages the liability risk we cover in the last man standing guide.
Who owns and who occupies
The property vehicle owns the building. The medical partnership occupies it and runs the practice, and the NHS notional rent flows to the owners in the property vehicle. The rent and its tax are covered in full in the notional rent guide; here the point is simply that the income belongs to the owners, in whichever vehicle holds the building.
Why separate the vehicle
Separating the property vehicle ring-fences the premises risk from the clinical partnership, lets clinical partners join the medical partnership without a premises buy-in, and cleanly separates the rent stream and its interest deduction so income and relief sit on the same side. For a partnership trying to recruit, removing the premises buy-in as a barrier to entry is often the decisive practical advantage.
Property partnership vs LLP
At a high level, the choice is between a general property partnership and an LLP. An LLP gives limited liability and separate legal personality, with members taxed personally on their shares much as partners are. The SDLT and capital gains consequences of transfers into and out of the vehicle differ between the two, and depend on the partners' shares and the timing, so this is a point to settle with specific advice rather than a choice to make on general principle. We flag it rather than over-promise: the wrong vehicle, or a poorly timed transfer, can create avoidable tax, so it is worth getting right at the outset.
SDLT on buying the surgery (England and Northern Ireland)
Buying the freehold of a surgery is a non-residential (commercial) purchase. In England and Northern Ireland the SDLT rates are:
- 0% on the portion up to £150,000;
- 2% on the portion from £150,001 to £250,000;
- 5% on the portion above £250,000.
The rates are banded, so each slice is taxed at its own rate. To illustrate with a clearly hypothetical figure: on a purchase of £600,000, the first £150,000 is free, the next £100,000 (to £250,000) is taxed at 2% (£2,000), and the remaining £350,000 is taxed at 5% (£17,500), giving £19,500 of SDLT. The figure is illustrative only and not a guide to any real surgery price, but it shows how the bands stack.
SDLT on a new lease
Taking a new non-residential lease can attract SDLT on the net present value (NPV) of the rent, separately from any premium paid. The NPV rates are nil up to £150,000, 1% on the slice from £150,001 to £5,000,000, and 2% above £5,000,000. Where the NPV of the rent is below £150,000, no SDLT is due on the rent. This is a point practices on new leases sometimes overlook, because they think of SDLT as only applying to purchases.
The NPV is not simply the annual rent multiplied by the term: it discounts the future rent back to a present value using the prescribed rate, so longer leases and higher rents push the NPV up, but not in a straight line. The practical consequence for a typical surgery lease is that the NPV often falls below the £150,000 threshold, in which case no SDLT is due on the rent at all. On a larger or longer lease where the NPV does cross £150,000, only the slice above that threshold is charged, and at 1% rather than the freehold rates, so the figure is usually modest relative to a purchase. The point is to run the NPV calculation rather than assume, because the result drives whether anything is payable, and because the return still has to be filed even where the tax is nil. Where a lease is later extended or the rent reviewed upwards, a further SDLT charge can arise, which is another reason to keep the position under review rather than treating it as a one-off at grant.
Scotland and Wales use different taxes
The figures above are England and Northern Ireland only. A surgery in Scotland is subject to Land and Buildings Transaction Tax (LBTT), and one in Wales to Land Transaction Tax (LTT). These devolved taxes have their own rates and bands, which differ from SDLT, so a Scottish or Welsh transaction must be costed on the relevant devolved figures. We deliberately do not quote LBTT or LTT rates here, because the point is to flag that the SDLT bands do not apply, not to substitute one set of numbers for another.
Partnership SDLT rules
Transfers of property into or out of a partnership are subject to special SDLT rules, including a sum-of-lower-proportions calculation that can alter the charge depending on the partners' shares. These rules are genuinely complex, and the ordinary purchase rates above do not simply apply when a building moves into or out of a property partnership. This is a specialist area: before any such transfer, take specific advice. We flag it rather than attempt the calculation, because getting it wrong is both easy and expensive.
Capital allowances on the building's fixtures
You cannot claim capital allowances on the structure of the building, but you can claim on the integral features and fixtures within the surgery: electrical systems, heating, ventilation and air conditioning, cold and hot water systems, lifts and similar items go in the special-rate pool, while general plant within a fit-out goes in the main-rate pool. On a surgery, the integral features can represent a meaningful slice of the cost, so identifying them is worthwhile.
AIA and the rates
The Annual Investment Allowance (AIA) of £1,000,000 a year gives 100% relief on qualifying plant and machinery, and is best directed at the special-rate (6%) integral features first, because those would otherwise attract relief only slowly. The main-rate writing-down allowance is 18%, reducing to 14% from 1 April 2026 for corporation tax and 6 April 2026 for income tax, under Finance Act 2026 section 28; the special-rate pool stays at 6%. For the wider equipment and allowances picture, see our guide to GP tax deductions.
The fixtures election on a purchase (the big one)
This is the point that most often costs practices money. When you buy a surgery that already contains fixtures, a CAA 2001 s.198 election fixes, jointly with the seller, the value attributed to those fixtures. That fixed value is what governs the allowances the buyer can claim going forward. Without the election (and the related pooling and fixed-value requirements), the buyer can lose the fixtures allowances entirely.
There is a strict 2-year time limit under CAA 2001 s.201: the election must be made by notice to HMRC no later than 2 years after the buyer acquires the qualifying interest. Miss that window and the relief is gone, with no second chance. This is a common, wholly preventable loss, and it is the single biggest reason to involve an accountant before completion, not after: the value of the fixtures has to be agreed with the seller and the election made in good time, which is far harder to organise once the transaction has closed.
Two further mechanics sit alongside the election and are easy to overlook. The first is the fixed-value requirement: the s.198 election records a single agreed figure for the fixtures, jointly signed by buyer and seller, and that figure binds both sides. It cannot exceed the seller's original qualifying expenditure on the fixtures, so it is not a free hand to invent a number; it is an agreement on how the existing pool of allowances passes across. The second is the pooling requirement: broadly, the seller must have brought the fixtures into a capital allowances pool before the transfer for the buyer to be able to claim, which is why the position has to be checked on the seller's side as part of the purchase, not assumed. These are the kinds of detail that a surgery purchase can fall down on quietly, and they are exactly what an accountant reviewing the deal before exchange is looking for.
The negotiating reality is worth noting too. The agreed fixtures figure is, in a sense, a zero-sum point between buyer and seller: a higher value gives the buyer more allowances to claim going forward but can increase the seller's balancing charge, so the number is something to settle commercially as part of the deal rather than after it. That is another reason it belongs in the pre-completion conversation, with advisers on both sides, rather than being left as an afterthought once the keys have changed hands.
New build versus existing build
On a new build or fit-out, both AIA and, for new (unused, not second-hand) main-rate plant, a 40% first-year allowance from 1 January 2026 (Finance Act 2026 section 29) are available, so there is plenty of scope to relieve the qualifying spend quickly. On a second-hand purchase of existing premises, the s.198 election is the lever that preserves the fixtures allowances. Knowing which situation you are in, and acting accordingly, is what separates a well-handled purchase from a missed claim.
How notional rent makes owning pay
Briefly, because the detail belongs in the sibling guide: owner-occupiers receive notional rent, a District-Valuer-assessed current market rent, which is taxable but set against the loan interest and premises costs. That is the income that supports the loan and rewards ownership, and it is a large part of why owning can pay where renting cannot build an asset. The full mechanics, including who sets the figure, how it is reviewed and how it is taxed, are in our notional rent vs cost rent guide.
CGT and Business Asset Disposal Relief when you eventually sell
When the premises, or a partner's share of them, is sold for more than cost, capital gains tax applies to the gain. For a building used in the partnership trade, the gain may qualify for relief, but the rules are specific and depend on how the premises are held and what exactly is being disposed of.
Business Asset Disposal Relief
Business Asset Disposal Relief (BADR) can apply on a qualifying disposal of a share in the business. The rate is 10% for disposals up to 5 April 2025, 14% for disposals from 6 April 2025 to 5 April 2026, and 18% for disposals from 6 April 2026, with a £1,000,000 lifetime limit per individual and a qualifying period of generally 2 years to the disposal. We date-tag the rate deliberately, because it steps up over time and the date of disposal changes the tax. BADR on premises held in a property vehicle, or claimed as an associated disposal alongside a withdrawal from the partnership, carries specific conditions, so its availability should not be assumed.
Associated disposals and personally-held premises
Where premises are held personally or in the property partnership but used by the trading partnership, an associated-disposal claim may be possible, made alongside a qualifying withdrawal from the partnership. But the relief is restricted, particularly where rent was charged for the use of the premises: charging a market rent can reduce or remove the relief on the associated disposal. This is a specialist point with several conditions, so it is one to check carefully with advice rather than to rely on. We flag it without over-claiming, because the interaction between charging notional rent and a later BADR claim is exactly the kind of detail that needs to be planned, not discovered at sale.
Timing
Because BADR steps to 18% from 6 April 2026, the timing of a disposal matters. The date of disposal for CGT is the contract date where the contract is unconditional, so the date contracts are exchanged, not completion, is generally what counts. Where a sale is genuinely conditional on a third-party consent, the disposal is dated when the condition is met. The interaction of timing with the rate is a planning point worth raising early; the right approach depends on the specific facts.
Own vs rent: a side-by-side
Pulling the threads together, balanced and non-advisory, because the answer is practice-specific:
| Factor | Rent (third party or NHS) | Own (via property partnership / LLP) |
|---|---|---|
| Capital outlay | None | Deposit plus a development or purchase loan |
| SDLT | Possible SDLT on lease NPV (often nil) | SDLT on the freehold purchase (England and NI) |
| NHS income | Lease rent reimbursed | Notional rent (current market rent) |
| Capital allowances | Limited (tenant's own fit-out only) | Integral features and fixtures, plus the s.198 election on purchase |
| Asset growth | None to the practice | The partners build an asset |
| Liquidity and exit | More flexible | Illiquid; reliant on a buyer for the share |
| CGT on disposal | None (no asset owned) | CGT on the gain, with BADR possible but conditional |
| Last man standing exposure | Lease version of the risk | Owner-occupier version of the risk |
Both columns carry a form of the last man standing risk, which is why the liability guide is the natural companion to this one. The buy-in decision itself, where premises is one input among several, is covered in our guide to the financial implications of becoming a GP partner.
Common mistakes
- Missing the s.198 fixtures election on a purchase, or missing the 2-year s.201 deadline, and losing the fixtures allowances entirely. Involve an accountant before completion.
- Assuming SDLT figures apply in Scotland or Wales. They do not; LBTT and LTT have their own rates.
- Ignoring the partnership SDLT rules on transfers into or out of a property partnership, and assuming the ordinary purchase rates apply.
- Not separating the property vehicle, so premises risk and the rent stream are locked into the clinical partnership.
- Assuming BADR is automatic on a premises disposal, when it is conditional and can be restricted, especially where rent was charged.
How we help GP practices decide own vs rent
We help GP partnerships and their property partnerships work through the own-versus-rent decision on the numbers. That means setting out the SDLT cost of a purchase or a new lease, identifying the capital allowances available on the fixtures (and, crucially, making sure the s.198 election is handled in good time on a purchase so the relief is not lost), modelling the notional rent against the loan interest, and looking ahead to the capital gains and BADR position on an eventual disposal.
Because the property vehicle, the rent income and the partners' personal tax all interact, the value is usually in joining them up so the structure is right from the start and the reliefs are actually captured. For the rent income and its tax, see our notional rent vs cost rent guide; for the liability side, the last man standing guide; for partnership and capital-account basics, the GP partnership tax guide; and where the property vehicle touches on incorporating private work, our guide to medical practice incorporation. For our wider work with GPs, see how we help GPs, the rest of our practice management guides, or get in touch.